Unretired and not loving it

Jeffrey Steele. Special to the TribuneCHICAGO TRIBUNE

A year and a half ago, Cicero family practitioner Dr. Arturo Lema was looking forward to a comfortable retirement, beginning in July 2000. At the time, he was 60 years old and had a tidy nest egg of $2.5 million, a sum his broker told him should be sufficient to fund his retirement lifestyle. Lema looked forward to spending his time as a volunteer, teaching in poor communities here and in his native Bolivia.

Then came the stock market downturn. He kept working. By December 2000, 60 percent of his retirement funds had disappeared. Worse news lay ahead.

"Sept. 11 wiped me out, because I had a margin call," Lema lamented. "I've lost 85 percent of all my assets--completely gone."

Instead of enjoying his second year of retirement, Lema has continued working, and plans to remain in the workforce until at least age 65 to recoup some of his losses.

He's hardly alone. Throughout the country, retiring types have either delayed plans for a life of leisure, or been compelled to end their retirements and return to the workforce. Many, like Lema, pegged their retirement hopes on portfolios rich in high-technology stocks and mutual funds, learning too late the stinging lessons hammered home by lack of diversification.

Though no hard data existon the number of people delaying retirement or returning to the workforce, Washington-based AARP is getting lots of anecdotal reports.

"We've definitely got people calling us and telling us either they're retired and trying now to find work, or they have jobs and planned to retire early, but are now delaying their retirement plans," said John Rother, the organization's policy director.

Financial advisers are also hearing clients sing the blues. "I've seen a number of instances where people were looking to retire and now have to rethink that," said Dan Foxen, a Chicago financial adviser. "In 15 years of doing this, this is the most concerned I've seen people be."

The folks hit hardest by the downhill slalom in stock market prices have been those who started investing late in their careers, then tried to catch up by purchasing higher risk stocks, said John Markese, president of the Chicago-based American Association of Individual Investors, a non-profit educational organization. "It was a series of compounded investment mistakes: not being diversified, high-risk portfolios, not enough committed to fixed income as close as they were to retirement," he said.

Another factor in the movement back to work is the spiraling increase in health care costs, including prescription drug costs.

Some retirees are taking part-time jobs to fund the purchase of their own health insurance or with an employer offering health insurance benefits to part-time employees, said Tom Kuhlman and Rick Pearson, principals with Towers Perrin, a Chicago management consulting firm specializing in human resource design and administration.

AARP identifies steps that can minimize the pain of having to keep working, or return to work after you have retired.

First, Rother said, keep your job skills up to date and remain as employable as possible. Don't rely on what you learned 20 years ago.

Second, undertake a fresh inventory of your retirement investment strategies, placing heavy emphasis on being diversified. If you have five years or more of work ahead of you, make sure you have an appropriate equity position, and as you get closer to retirement, reduce stock market exposure.

Third, Rother said, consider hanging on to your job a little longer. "Health care inflation is now back to double digits," he said. "The worst thing you can do is quit a job before you're 65, only to discover you can't get health insurance."

Remember that if you have to come out of early retirement it will be tough to find the kind of employment you're accustomed to, said Jack Reisenberg, director of Meder & Associates, a Bannockburn-based retained executive search firm. He terms a return to work after age 55 "the worst possible time of your life" to make such a move.

The luckiest individuals will find project work, consulting or employment with a kind of "rent-an-exec" company, in which they leverage their background, experience and professional relationships, Reisenberg said. Or they may have to establish their own businesses to bring in enough money while their investment portfolios recover.

Part-time employment varies enormously by industry, Rother noted. Many start out seeking part-time work, only to find full-time jobs the only ones available to them.

Kuhlman noted that in the short term, with businesses in cost-cutting moods, early retirements will continue to be offered to employees. "But longterm, there's going to be a shortage of skilled workers, and fewer skilled workers coming in," he added. "Companies are going to have to get more creative and [have] flexibility in offering pay and retirement packages."

As for Lema, he's maintaining a positive attitude as he spends what otherwise would have been his retirement years working. "I lost $2.5 million and I hope to get $5 million," he said. "Hope is something I don't lose. I always have hope."